President Trump issued an Executive Order imposing economic sanction on the initial coin offering (“ICO“) by the Government of Venezuela, called the Petro Coin (the “Petro ICO“).
The Executive Order makes it illegal to engage in transactions, dealings or financings in connection with the Petro ICO, which would include buying, selling, trading, marketing, listing or facilitating, in any way, the Petro ICO by any US person or any person in the US.
It is also illegal to attempt to violate the Petro ICO sanctions, as well as to conspire to violate the sanctions or to avoid or evade them (sanctions avoidance that occurs, for example, when money is moved through a secondary country, often Dubai, to hide its illegal origin).
What is a US Person?
It is important to note that with all US sanctions, the persons who are caught are not just Americans. By definition, it casts a much wider net and applies to any person subject to the jurisdiction of the US (a “US Person“) and those persons include:
- US citizens and residents wherever they are situated, including Canada.
- Anyone physically in the US, regardless of their nationality.
- Any corporation, partnership, association or any other organization incorporated in the US.
- Any corporation, partnership, association or other organization, regardless of where incorporated or doing business, that is owned or controlled by any US Person. So even a Canadian company that is controlled by a US person or US company must comply with US sanctions law.
World’s 1st Sanctions Against a Digital Currency
The economic sanctions against the Petro ICO are the first sanctions issued in the world against a digital currency.
The Petro ICO has been controversial for a number of other reasons including that:
- It’s the issuance of a securities without securities law considerations or disclosure to protect investors;
- It is represented to investors as allegedly backed by both oil and gold but is likely backed by neither;
- It is available for sale to non-Venezuela citizens provided they pay in Euros, Yuan, Rubles and Turkish Lira;
- One can also buy the Petro ICO with Bitcoin, Ether and NEM. The digital currency NEM has its own controversy – it was allegedly the victim of theft from hacking. Allegedly, some of the NEM digital currency ended up at a Vancouver digital currency exchange however, there is no Vancouver digital currency exchange that accepts NEM, or has ever accepted it;
- According to the Petro ICO White Paper, Venezuela will make the Petro coin available all around the world (irrespective of sanctions law impediments); and
- Venezuela claims it has already sold over $5 billion Petro coins to people in over 127 countries but its unclear how anyone will be able to hold them or ultimately cash out with sanctions in place.
NEM Tweets that Petro ICO Is Using its Blockchain
There’s more to the NEM connection with the Petro ICO – according to the Venezuelan government’s White Paper for the Petro ICO, NEM is the Blockchain for the project. I’m guessing no founders of NEM or its foundation considered the advisability of legal advice before deciding to disregard US sanctions law. NEM even went so far as to broadcast on Twitter that the Venezuelan government is using NEM for the Petro coin, which would amount to providing transactions that are outright prohibited. Granted, NEM may not be an American company but it uses the US financial system, and needs US correspondent banking to survive. The fastest route to losing correspondent banking services is to knowingly violate US sanctions law.
The official website for the Petro ICO is here.
All you need to do to buy into the Petro ICO, is to scan any ID to the government website and send them your cash or Bitcoin. They even take funds from Canadians and USD, according to the official website.
But please don’t buy any.